Annuities can be a hedge of longevity risk, as they protect the survival of your money. Besides, the experts are confident that guaranteed income is a key to financial stability, as poverty is one of the biggest fears of retirees.
Almost any investment carries a certain risk, but some types of annuities can protect people from market downturns. However, stability costs money. Thus, the annuity interest rates, as a rule, are slightly lower than market rates, since insurance companies prefer reliable investments to high incomes.
Annuities are not the best way to compensate for inflation, but such an agreement can provide moderate cash income for life.
Annuities are only the first part of a well-designed plan. As we age our needs and values change, so in old age we have to have different sources of income. Those can be securities or funds, but, in most cases, annuities provide more reliable guarantees.
When choosing an annuity, a lot depends on age, your risk tolerance and needs. A combination of various financial products with annuities can provide a high return.
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